Citigroup is poised to win control of China's Guangdong Development Bank (GDB) for £1.7bn.
A consortium led by the world's biggest financial services group is thought to have seen off rival bidders ABN Amro, the Dutch bank, and France's Société Générale to scoop 85 per cent of the medium-sized Chinese lender.
America's Citi will control almost half the shares, take seats on GDB's board and have the right to appoint the bank's new chairman and president. Its consortium partners include several big state-owned Chinese firms, including China National Cereals, Oils and Foodstuffs and at least one other foreign investor.
Officials from GDB's regulator, the People's Bank of China - the country's central bank - and the Guangdong provincial government made their decision behind closed doors late Thursday.
Exclusive talks between Citi and GDB over new management, staff benefits and IT support may get under way as early as next week. The bank has almost 500 branches, mainly in the booming south.
Citi is waiting for the Chinese cabinet to give the deal its seal of approval. Special permission is required because Citi's stake will far exceed the 20 per cent of any Chinese lender generally allowed to fall into the hands of a single foreign company. Groups of foreign investors can collectively own a quarter of a Chinese bank.
Beijing is pushing for Chinese lenders, which are saddled with £116bn of bad debts, to secure capital and expertise from abroad ahead of opening to foreign competition next year.
Overseas investors are scrambling for a piece of the £1 trillion personal savings market there and a soaring consumer credit sector that offers enormous potential for growth. Earlier this year, Royal Bank of Scotland paid £1.8bn for a 10 per cent stake in the state-owned Bank of China.
Citi wants to catch up with its rivals HSBC and bank of America, which have bigger footprints in China. It revealed earlier this week that it plans to quadruple its 4.6 per cent stake in the Shanghai-listed Pudong Development Bank.
Separately, Citi revealed that it is among 13 Chinese and foreign banks named by the State Administration of Foreign Exchange to act as a market maker in China's currency, the yuan.
China's central bank facilitates all foreign exchange transactions but Beijing is heading towards more market-driven pricing.Reuse content